Working Capital Requirement Calculator
Estimate the operating cash tied up in the business — inventory plus receivables minus payables — and see it as a share of revenue.
How it works
Working capital requirement = inventory + accounts receivable − accounts payable · % of revenue = WCR ÷ revenue × 100 · Days = WCR ÷ revenue × 365
The working capital requirement is the operating cash locked up in the day-to-day cycle: money sitting in inventory and owed by customers, less what you can defer by owing suppliers. It differs from accounting working capital (current assets minus current liabilities) by focusing only on these three operating items. A growing business must fund a growing WCR, which is why profitable firms can still run short of cash; a negative WCR means suppliers finance the cycle for you.
Worked example
With $80,000 of inventory, $120,000 of receivables and $60,000 of payables, the requirement is 80,000 + 120,000 − 60,000 = $140,000. On $600,000 of annual revenue that is about 23.3% of revenue, or roughly 85 days of sales tied up.
Frequently asked questions
How does this differ from net working capital?
Net working capital is all current assets minus all current liabilities, including cash and short-term debt. The working capital requirement isolates the operating cycle — inventory and receivables minus payables — to show the cash the core operations consume.
What does a negative requirement mean?
It means payables exceed inventory plus receivables, so suppliers effectively fund your operations. Businesses that collect from customers before paying suppliers — like some retailers and subscription firms — often run negative, which is a cash-flow advantage.
Why can a profitable business still run out of cash?
Growth increases the working capital requirement: more sales mean more inventory and receivables to fund up front. If that cash outflow outpaces collected profit, the business can be profitable on paper yet short of cash.
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Educational estimate, not financial advice.